Environmental Resources and Economic Growth

James Roumasset University of Hawaii

Hua WangWorld Bank

Kimberly BurnettUniversity of Hawaii

Environmental Kuznets Curve

0

50

100

150

200

250

300

0 5000 10000 15000 20000 25000 30000

income per Capita

Kg SO2 for 55 developed and developing countries, 1987-88,

turning point $3137

Ambient concentrations in 11 Chinese cities, 1981-2001

0

20

40

60

80

100

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

Year

ug

/cu

bic

me

ter,

an

nu

al d

aily

av

era

ge

NOx

020406080

100120140

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Year

ug

/cu

bic

me

ter,

a

nn

ua

l da

ily a

ve

rag

e

SO2

0100200300400500600700

19

81

19

82

19

83

19

84

19

85

19

86

19

87

19

88

19

89

19

90

19

91

19

92

19

93

19

94

19

95

19

96

19

97

19

98

19

99

20

00

20

01

Year

ug

/cu

bic

me

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rag

e

TSP

Major City EKC’s

NO

X

gdppc6270 14059.8

71

151

Beijing, NOx

SO

2

gdppc9276.84 19733.7

42.3061

91

Shanghai, SO2

SO

2

gdppc4255.32 11097.2

48.2578

199

Tianjin, SO2

TS

P

gdppc3737.51 6096.75

311

641

Taiyuan, TSP

TS

P

gdppc5324.39 11341.5

288

540

Anshan, TSP

NO

X

gdppc7306.41 21216.7

67.4661

152

Guangzhou, NOx

NO

X

gdppc4533.19 10901.2

21.6735

81

Changchun, NOx

SO

2

gdppc5324.39 11341.5

73

125

Anshan, SO2

TS

P

gdppc3532.37 10095.6

180.222

372

Chengdu, TSP

“Usual-shaped” EKC’s Shanghai, NOx Nanchang, SO2 Tianjian, TSP

NO

X

gdppc9276.84 19733.7

60.8055

105

SO

2

gdppc2804.18 8722.24

29

84

TS

P

gdppc4255.32 11097.2

247

396

Inverse EKC’s

Xining, NOx Xiangfan, SO2 Suzhou, TSP

NO

X

gdppc2230 3500.72

11

57.137

SO

2

gdppc2946.03 7105.26

11

51.0652

TS

Pgdppc

7880.68 17140

134.851

436.757

Why is there no clear pattern?

Regulation comes in waves Growth uneven Decentralization Relative prices, e.g., coal Short time horizon

Statistical reporting

Falling levels of NOx, SO2, TSP in 11 major cities

Contrasts starkly with bleak qualitative reports

What information is needed to complete story?

Towards improved statistical reporting

TSP measurement – PM 40 vs PM 10 NOx measurement – NO vs NO2 Decentralization of industry? All emissions are not equal – need source-

receptor modeling

Towards improved statistical reporting cont

Sampling protocols – location, seasonal, weather factors (Beijing – TSP falling, but May 2000, then Premier Zhu Rongji warned that the rapidly advancing desert would necessitate moving the capital from Beijing

Season matters – In Beijing, winter SO2 2.7 times worse for health than average SO2, and 14.2 times worse than summer SO2 (Brajer and Mead 2004)

But with more careful analysis…

Auffhammer et al. (2004) – CO2 in 30 provinces from 1985-2000

Correct approach is effect of income with controls on composition of industry, population, and proximity to the coast

China on the flat part of EKC Income not as important for CO2

concentrations as population growth

Water pollution

Table 1. Water quality trends in the Seven River Basins, 1991-2003 Percent of samples in each water quality class Water quality

classes 1991 1992 1993 1994 1995 1996 1997 1998 2003

Class I and II (good)

3 5 9 11 10 16 16 18 38

Class III and IV (moderate)

64 57 64 62 51 44 53 42 32

Class V and V+ (poor)

33 38 26 27 39 40 30 40 30

Source: PRCEE, CNEMC, and CRAES (2001) as cited in World Bank (2001), SEPA (2003)

Concentrations

Proportion in poor water classes decreasing, but concentrations increasing

Table 2. Annual average water trends in two lakes (mg/l) 1992 1994 1996 1998 Chao Lake Total Phosphorus 0.25 0.34 0.25 0.36 Total Nitrogen 3.83 4.19 3.46 2.88 Dianchi Lake Total Phosphorus 0.23 0.30 0.23 0.41 Total Nitrogen 2.14 3.00 2.53 4.76 Source: PRCEE, CNEMC, and CRAES (2001) as cited in World Bank (2001)

Natural Resources – Water

Water resources not increasing; supply (raw provision of water to consumers, including transportation loss, from the water resource) decreasing

246.826 million people without running water Problem especially severe in populous northern cities,

water scarce, pollution severe, low income households with no running water

Table 3. Total water resources in China, in billion cubic meters. 1997 1998 1999 2000 2001 2002

2785.5 3401.7 2819.6 2770.1 2686.8 2825.5 Source: SEPA (2004)

Table 4. Available water supply in China, in billion m3 1997 1998 1999 2000 2001 2002 2003 Surface 456.6 441.9 451.4 444.14 444.80 440.4 428.7 Ground 103.1 102.8 107.5 106.75 109.67 107.2 101.6 Total 562.3 547.0 561.3 553.1 556.7 549.7 532 Source: Ministry of Water Resources, China Statistical Yearbook

“people are found boiling black water and scraping off the scum that accumulates on the top for drinking and cooking” New York Times, Sept. 12, 2004

Soil Desertification: 900 square miles, 5 billion tons lost/yr.

(Brown, 1994) Since the 1990’s, desertification has been major land

resource concern But, productivity & quantity farmland increasing, 140

million hectares in 1993 (Lindert, 1996) Soil movement not soil loss Increased food imports reflect changing comparative

advantage. Off-site problems, health effects may be of greater concern

Forests

Table 5. Trends in forest resources, 1934-1993

Year Forested area M Ha

% Forest cover

Timber area M Ha

Forest volume B m3

Non-timber area M Ha

1934 86.3 9.0 -- -- -- 1962 85.5 8.9 77.7 6.5 2.0 1976 121.9 12.7 98.0 7.7 3.1 1981 115.3 12.0 80.6 6.9 3.3 1988 124.6 13.0 80.1 6.2 3.7 1993 133.7 139. 84.9 6.7 3.9 Source: Pei and Xu (2000) as cited by World Bank (2001)

Forests cont

Total area increasing, total volume rebounding (Rozelle et al. 2003) but quality, biodiversity decreasing

Afforestation campaigns – fast growing species, overly dense spacing; problems with species viability, commercial value, biodiversity.

Fisheries

total harvest (thousand tons)

1996 32,881,150

1997 36,017,759

1998 39,066,548

1999 41,224,312

2000 42,789,984

2001 43,820,987

Source: Chinese Academy of Fishery Sciences

Fisheries

Largest producer in the world, largest number of fishing boats

Over-fishing, water pollution => decline in stocks

Regulations in place to limit number of boats but not quotas

Quotas considered (not ITQ’s)

Energy

0

0.5

1

1.5

2

2.5

3

3.5

4

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03

Oil to coalconsumption ratio

Coal

Table 6. China’s production and consumption of coal, in billions of tons, 1980-2003 1980 1985 1990 1995 2000 2001 2002 2003

Production 0.68 0.96 1.19 1.53 1.31 1.46 1.52 1.67 Consumption 0.67 0.92 1.12 1.49 1.28 1.36 1.42 1.61

Source: http://www.eia.doe.gov/

Energy cont.

Oil cleaner, less construction time Coal consumption still growing especially

after 2000 (relative energy cost, import prices)

2nd largest exporter of coal beginning 2001

Depreciation of Natural Capital

Air pollution: growth less than GDP Water pollution: not greater than GDP Renewables: decrease in stock reduction Non-renewables:extraction growing less

than GDP

GNNP

Constant or decreasing wedge

Opportunities for further convergence, i.e.higher growth

$ NNP GNNP Time

Policy Reform

Inconsistent regulations – across industries and firm sizes

Weak incentives – small fines, no incentives for inspectors

Lack of enforcement – comply only during inspections, not enough inspectors

Underpricing of natural resources

Improvements?

Water prices going up in some areas Experimentation with tradable sulfur

permits

Remaining Challenges

More attention to air than water pollution Need for water demand management Water, forestry resources remain

underpriced, overused Use of oil has increased, but not as fast as

energy consumption Major roadblock appears to be public

administration

Conclusions

Substantial progress in energy efficiency and emissions/BTU

Offset by rapid growth and low per capita income, i.e. EKC max remains in future

Growth statistics not compromised by failure to deduct environmental depreciation